Monday's small gains on Wall Street helped support Asian markets. The S&P 500 notched up a third consecutive record closing high. But data showing existing home sales slipped 1.2 percent in June, missing expectations for a 1.5 percent rise, capped stock market gains.

Still, some experts said the data revealed a positive long-term trend.

"What we are seeing in the U.S. property market is just a little caution at the margin in recognition that mortgage rates will be rising from their record low levels. Demand remains high and this number is a fabulous result confirming a rampant U.S. economic growth spurt is currently underway," said Clifford Bennett, chief economist of the financial services firm White Crane Group in a note.

How to play China's economic rebalancing

Matt Jamieson, Head of APAC Research, Corporate Ratings Group at Fitch Ratings thinks the housing, cement and steel industries will benefit the most from China's economic transition.

Shanghai rallies 2%

Chinese shares outperformed the region after state newspaper Beijing News reported that Chinese Premier Li Keqiang said the government would not allow the country's gross domestic product (GDP) growth to fall below 7 percent.

Supportive comments from China's vice-premier Zhang Gaoli also bolstered sentiment this week. He reiterated Beijing's commitment to supporting the export and service industry while the economy steers towards a consumer-oriented growth, Reuters reported.

HSBC releases the flash estimate of its July purchasing managing index (PMI) on Wednesday - a survey that could shed some light on how China's manufacturing sector is holding up this month.

Nikkei tests 14,800

Japanese stocks erased opening losses after the government raised its economic assessment for a third straight month, upping its capital expenditure and factory output targets on signs of deflation easing.

The benchmark's next barrier is 14,953 points, which would mark a new two-month high.

"Markets will now look for long awaited reforms from [Japanese Prime Minister] Shinzo Abe. Patience will likely run thin should no concrete announcements be forthcoming over coming days and weeks," wrote analysts from Credit Agricole in a research report.

A rally in Australian gold miners helped the benchmark index briefly touch a new two-month high at the 5,027 mark after the yellow metal traded near a one-month high. The benchmark index closed down just 10 points shy of that level.

Strength in the Japanese yen propped up South Korean exporter stocks and lifted the benchmark index to its highest levels since June 13. Still, the benchmark index traded at a 40-point discount to it's 200-day simple moving average (SMA) of 1,944.